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Raising the Bar for Supply Chain Innovation

This year's MH&L Innovation Awards winners are a diverse group, representing aerospace, food & beverage and retail. Their innovations are more about setting their companies up for future success than solving problems of the past.

This year's MH&L Innovation Awards wrap-up feature is a look back at some of the exemplary stories we've run in 2014. It's also a preview of how leading companies intend to maintain their market positions in the coming year.

GE Aviation offers a vision for the practical use of 3-D manufacturing (additive) technology to increase process efficiency in the short run and to open up new product design possibilities in the long run.

Silver Eagle Distributors found a way to apply a warehouse management system that benefited its truck routing efficiency as well as its under-roof operations.

Goya Foods is reexamining its global sourcing strategies and offers insights into how the newly expanded Panama Canal will support them.

Urban Outfitters offers an example of how product sortation has been reapplied to suit its "hybrid DC" concept.

Be sure to read the comments of the judges from MH&L's Editorial Advisory Board at the end of each piece. They will give you an added perspective on why these achievements are so impressive.

MAKE: Will 3-D Supply Meet GE's Sky-High Demand?

Innovator: GE Aviation

In 2005, an engineer poring over designs for a new jet engine component at GE Aviation stumbled upon a sort of crazy idea: We can just make it ourselves. She had been working with a local 3-D printing service in Cincinnati, Ohio, called Morris Technologies for about five years at that point, developing prototypes for a new kind of fuel injector.

Over that time, she had watched the additive technologies at Morris blossom from rough plastic models to finished metal pieces that almost seemed to rival the real thing. In fact, she thought, they did rival the real thing.

What's more, she realized that "GE could use additive technologies to create intellectual property that it would not be able to do making it from traditional means," recalls Greg Morris, co-founder and CEO of Morris Technologies.

"In fact, they could actually enhance the design by doing things they couldn't do any other way outside of additive."

So, the engineer thought, by abandoning the normal supply chain and its vast, global network of manufacturers responsible for producing the 20 or so components of the old fuel nozzle, GE could make a better, simple nozzle all by itself, designed and manufactured in-house.

As additive manufacturing builds up, the supply chain is flattened out, mashing the global web in a straight line stretching directly from producer to consumer.

In 2016, GE Aviation's additive production facility will begin printing fuel nozzles for the new LEAP jet engine—an engine that will be used to fly Airbus A320s, Boeing 737s and Comac 919s.

These are 100% 3-D printed components, designed by GE engineers and printed on GE equipment in GE factories, which will be producing 30,000 to 40,000 of them per year by 2020. This is exactly what the 3-D printing world has been waiting for.

"This is a fuel nozzle, not some trivial part," Morris explains. "This is a technically exceedingly challenging part with a very, very demanding application with a critical role in the engine. It's something that GE has never produced internally before, which it never could produce internally before. But now it will."

And that, he says, is a big deal.

"This project alone has the promise to change the whole industry," he says. "It's a paradigm shift in how we design and manufacture certain components for our industrial products. It's overwhelming how many different directions and ways GE can leverage this technology."

A comprehensive three-part manufacturing system marks the birth of the first real 3-D printed supply chain in the major industrial world.

It began in November 2012 with the acquisition of Morris Technologies, which has since been rebranded as GE Aviation's Additive Development Center, or ADC.

No longer a print shop, the ADC is now devoted solely to the development of new technologies, techniques and designs that will advance GE's additive work.

"Our mission is to really innovate on the R&D side," explains Morris, who is now the strategy/business development lead for the ADC. "We see what new things we can come up with on this technology that will help us make better parts, more robust parts, more accurate parts and better finished parts."

Once his team has done that, he says, the CAD files for the parts are zipped across town to Morris' biggest competitor, Rapid Quality Manufacturing. But there's a GE Aviation sign outside that facility too now, along with a new name: the GE Additive Lean Lab (ALL).

The third stage in this process, after the ADC figures out how to make a part with the quality it needs and the ALL figures out how to make it at the price it needs, the files and the recipe will be sent over to GE's additive production facility for printing and shipping—once the facility is either acquired or built, that is.

Morris sees an exciting business scramble about to begin. "We're going to see a very dynamic atmosphere here shortly," he says.

Judge's Comments

"This out-of-the-box manufacturing not only builds the user business, but can also build industries and supply chains."—Roger Bostelman, National Institute of Standards and Technology

"This innovative approach is terrific. Clearly some significant risks must have been taken here and it appears the potential for reward to this commitment is high."—Tan Miller, Rider University

"Powerful commentary on a major initiative to change the supply chain forever."—Ron Giuntini, Giuntini & Company

STORE: Technology as a Profit Preservative

Innovator: Silver Eagle Distributors

Vendor: AGI

In the beverage industry, shelf-life issues conspire with ever-multiplying SKUs to raise the complexity bar for manufacturers and distributors. Combined with the variety of store formats out there, efficiency demands some level of technological sophistication on the fulfillment side. That's why more and more beverage companies are adopting warehouse management systems (WMS). That's also why WMS providers are developing expertise in this space.

"We started to work in the beer industry six years ago, and at that time there were maybe less than 20 companies in the entire country that had any type of WMS technology in the beer business," says John Bryant, CEO of AGI, a WMS vendor serving customers like Silver Eagle, the largest distributor of Anheuser-Busch products in the U.S. and the second largest beer distributor in general. "Today it's over 60%, on a case volume basis. Our biggest challenge is to be able to provide and deliver the technology in a cost-effective manner so that companies that do 2 million cases or less can afford it."

No matter what size the beverage manufacturer or distributor, proximity to customers and truck utilization are universal cost challenges. That's why Silver Eagle has chosen to build facilities closer to key markets and to use logistics technology to make best use of those facilities.

"If you weigh the differences with the drive time, it's worth it to be closer to the customer," says Bob Boblitt, Silver Eagle's executive vice president and COO. "Our enemy is windshield time. I can't tell you the number of times our customer said the competition isn't servicing them with the frequency they want because they're too far away. We have sites located generally so we can service those special events our customers promote."

Silver Eagle is rolling out AGI's WMS throughout its entire system, including a new site in Pasadena, Tex. This is a location-based inventory system in which every SKU has a place—and given the location requirements of a product like beer it allows management to know what product is on current pull. Silver Eagle has grown so rapidly and taken on so many SKUs over such a short period of time that even a year ago it was anxious to get its Pasadena facility up and running. This facility adds 240,000 sq ft of warehousing space to the network and creates better transparency so management can better observe performance and set benchmarks.

The benefits of their WMS extend to the delivery process. Silver Eagle is sequencing their routes throughout all locations, which they had not done in the past, according to John Bryant, CEO of AGI.

"When they sequence their routes we're able to use technology to build the pallets to the top of each bay in order delivery sequence," he says. "We're able to have full pallet utilization in the warehouse. It optimizes the delivery side, fleet utilization and the warehouse. Their customers' demands, particularly their larger clients, are increasing. That means they need to take advantage of automatic ship notices, particularly for Walmart and the large grocery store chains, and they need compliant labeling so that the big chains can receive product very quickly."

Judge's Comments

"Impressive and sensible use of a ‘balanced' material handling approach using a mix of WMS and standard material handling equipment to facilitate warehousing productivity."—Tan Miller

"Highly customer-focused solution execution."—Ron Giuntini

"A great use of technology and material handling automation to address a significant opportunity for improvement. Well done."—Jim Tompkins, Tompkins International

"High complexity and they're staying ahead of the game. They're juggling new FDA guidelines, three different temperature zones, local DCs that need to be near customers for efficient transport and interlinked technology, which makes this a high score in my book."—Roger Bostelman

MOVE: Panama Canal Expansion Promises Transport Cost Contraction

Innovator: Goya Foods

As vice president of the Texas region for Goya Foods, Evelio Fernandez's mission is to make the best use of his plant's location at the Port of Houston to minimize transportation costs. Goya is a major importer and exporter, so transportation costs are a constant concern for Fernandez. That's why he's planning how his company will make best use of the Panama Canal once its expansion is complete in 2015.

Goya brings products out of the western part of South America through the Canal. It also sources from Thailand and Vietnam, and although Goya uses the Port of Long Beach in California for that traffic, Fernandez has high hopes for what the expanded Canal will mean for that piece of his business.

"With the expansion, and bigger vessels being able to cross the Panama Canal, some of that cargo may come down into the Canal into the Port of Houston and that would benefit us in better times getting products to us," he says. "Timeliness is an issue, especially from Thailand because it's a long way and the Port of Long Beach is very busy. Sometimes there are hiccups there and things get delayed. It would be ideal if at least some of it could come through the Panama Canal into Houston."

Fernandez has dealt with delays from that West Coast port before, most notably during the recent spate of labor disputes. Those made the Panama Canal expansion even more attractive for him.

"If we can avoid Long Beach that's a win/win," he adds. "More important than land transportation is getting it on time off the port due to the congestion there. Most of the cargo comes to us from there via rail, piggyback. That's been working fairly well but you can get 3-4 days delayed trying to line up rail service. We could shave 5-6 days or longer if the Canal route were to open."

Fernandez says the expanded Canal's ability to accommodate bigger ships will mean more economical loads for the company. "Using larger vessels could help us bring in more containers in the same vessel. If we count Puerto Rico, we probably bring in 40% of the products we sell from outside the States."

Goya has an extensive line of products coming from South and Central America for which the suppliers are unwilling to change the delivery infrastructure. The same goes for coconut water, which comes out of Thailand and Vietnam. The company receives six to seven containers a week from Ecuador and Columbia and as many as 50-60 at a time out of Thailand.

Goya is preparing to open more state-side facilities, however. Right now Goya sources flour for its corn patties from Columbia but the company is building a manufacturing facility in the U.S. It also recently opened a new cannery in Brookshire outside of Houston, so more of the beans it packs at its cannery in Puerto Rico will be processed in Houston.

Judge's Comments

"Interesting take on total inbound transport costs."—Ron Giuntini

"Terrific look to future product movement! Knowing the best shipping methods and costs over land and sea and predicting these and other product (e.g., fish) trends will no doubt keep their customers happy."—Roger Bostelman

COMPETE: Urban Outfitters Taking Hybrid DCs for a Spin

Innovator: Urban Outfitters

Vendor: Vanderlande

For all retailers, Amazon has set the bar for the speed-to-market concept with its proliferation of fulfillment centers from coast to coast. Ken McKinney is aware of those capabilities, but he's even more aware of his customers' capabilities to map their own logistics future. As executive director of Urban Outfitters, that thought hit him a few years ago when he realized that California represents its number-one market for web orders and it was still taking four to five days to get product to customers there from its Trenton, S.C., distribution center. That's why Urban now serves that market out of the most recent addition to its DC network, located in Reno, Nev.

The addition of this, its second Internet fulfillment DC in the U.S. (third overall, including a DC in the UK), means this apparel and home goods retailer can now service close to 80% of its customers within a two-day ground transit time. In addition to these Internet fulfillment centers, the company operates two U.S. DCs (Gap, Pa., and Reno, Nev.) and one UK DC that service its retail stores.

If an item is out of stock in one of the company's DCs, it has the capability of fulfilling the order from the inventory in one of its stores. On any given day, 7,000-10,000 orders can be fulfilled in this manner across all of its brands.

"We have realized substantially more revenue since introducing this capability," he says. "That said, the most efficient method of fulfilling a customer order is via the DC network."

That's why Urban plans to follow up its Reno project with a new DC in Gap, Pa., which will allow Urban to deliver to its New York customers in a day.

McKinney points out that fulfilling customer orders is a markedly different process than sending merchandise to the stores. "In terms of productivity, we measure units per man-hour in our retail DCs and we measure orders per man-hour in the direct-to-consumer operations. Direct is so much more labor-intensive because every two to three units (the average order size) you're either sealing a box or a bag. Add to this the task of processing customer returns and we're talking a significant delta between the retail store DCs and the Internet DCs."

Urban has adopted the campus concept for its distribution operations, with one site supporting both retail and direct-to-customer channels. It is working with warehouse automation supplier Vanderlande on this project. The concept is dubbed a "hybrid," and includes a cross-belt sorter for the direct business and a put-to-light packing solution in the retail operations servicing the needs of 400 stores.

"The campus concept enables us to flex our labor back and forth between buildings," McKinney explains. "Those businesses don't peak at the same time; retail peaks a few weeks ahead of direct, and having the ability to deploy labor across channels is a key advantage." The addition of this DC in Reno helped Urban serve 80% of its customers within two days by ground.

With a cross-belt sorter, orders can be out the door in four hours, from the time they are received in the ERP, thanks to high picking efficiency. An order for a typical retail wholesaler might call for 20 units while an e-commerce order might call for two or four. That challenge was met with a cross-belt sorter using double chutes for accuracy and high throughput. Synergies between the two channels are sought wherever possible.

Judge's Comments

"Urban uses an impressive mix of warehousing technological capabilities to create a flexible and labor efficient multi-channel operation on a single campus."—Tan Miller

"An innovative solution to an opportunity of significance to many retailers."—Jim Tompkins

"I give them kudos, and my vote, for cross-belting within DCs along with shifting labor to the current need to improve their competitiveness."—Roger Bostelman